Vukancic v Velcic

Vukancic v Velcic - [2007] NSWSC 1001 - NSWSC 2007 case summary — Zoe

[43]

32 A full picture of how the injury occurred did not emerge until Mr Vukancic was recalled to give supplementary evidence late in the case. His ultimate version of the circumstances of his injury was that in May 1996 he was working on the Sydney Casino site, and on 24 May had some pain, not very strong, in his low back; on a pain scale of ten he rated it "close to zero". He was not entirely sure what he was doing at the time, though it was "possibly stripping" - that is, removing the formwork after a concrete pour. Nor could he say whether he was standing, crouching or kneeling at the time, "you do everything". He continued working until 27 May, when he was doing formwork, closing a lift well. He was working with a workmate Ziad Gradenicic, a carpenter. He was on a scaffold, the deck of which was 180 cm above the concrete floor below, and had headroom of 120 cm to the ceiling formed by the floor above. [There was some confusion in the evidence as to whether the scaffold deck on which he stood was 120cm or 180 cm above floor level, with Mr Vukancic often agreeing that it was 120cm, but reading his evidence as a whole - including his description of the available headroom - a court would very probably have accepted that the scaffold was at a height of 180cm, leaving about 120cm only of headroom]. Being 185 cm tall, he had to crouch when on the scaffold. The carpenter, who was standing on a lower level of scaffold, about 60 cm below him and to his left, passed him a length of timber (called a waler - about 3 metres by 10 cm by 5 or 7 cm). He then, with his left arm, pressed the proximate end of the waler - about 30cm from the right hand end - against the plywood formwork, using the fingers of his left hand to hold a nail in place, while using a hammer in his right hand to fix the waler to the plywood. Meanwhile, the carpenter was holding the remote (left hand) end of the waler, which was horizontal, and fixing it to the formwork in a similar manner. While Mr Vukancic was doing this, he noticed very strong pain in his back and on the anterior and posterior of both thighs, which he rated at up to 10 on the pain scale - so strong that he could not move. He sat down on the scaffold, then his workmate helped him get down, and he went to first aid, by which time he felt a bit better; the pain reduced to a level of about 5. He ceased work and went to see his GP Dr Oon, accompanied by Mr Gradenicic.

[71]

61 In my view there is a high degree of probability that the trial court would have accepted Mr Vukancic's ultimate version. There was certainly a likelihood that it would have been found that there was an initial injury on 24 May, but the disabling injury must have been on 27 May, when he ceased work. As it transpired, the version ultimately revealed by Mr Vukancic was less favourable to his own case than that which had been assumed by Mr Tozer (which involved Mr Vukancic supporting the whole weight of the waler himself, unassisted, whereas on the ultimate version half its weight was supported by Mr Gradenicic). The ultimate version is probably the least unfavourable to the employer, because it involves him supporting only half the weight of the waler. The alternative versions are not without their own risks as to liability for Dalma. Accordingly, while an element of risk attended acceptance of Mr Vukancic's ultimate version, and the discrepant histories would have been a factor inclining his advisers towards a cautious approach, I do not think there was much risk that, absent negligence on the part of Velcics, Mr Vukancic's ultimate version would not have been accepted at the hypothetical trial; moreover, if it were not accepted, the available alternative versions would likely have had no less potential for liability on the part of the employer. I therefore do not consider more than a very modest discount would be warranted on this account alone. 62 However, acceptance of Mr Vukancic's ultimate version would not necessarily involve a finding of breach of duty against Dalma. Mr King SC - whose opinion was given on an assumed state of affairs that had more potential for common law liability than Mr Vukancic's ultimate version - was of the view that it was a case that a solicitor would not recommend be litigated without expert opinion to support it, but that an opinion such as that proffered by Mr Tozer would indicate that a common law claim had reasonable prospects of success.

[74]

65 I accept that the requirement to work in a confined space for a sustained period while supporting a timber beam and applying force to it raised some prospect of establishing liability. Mr Tozer's evidence demonstrates that there would have been expert opinion available to support Mr Vukancic's case at the hypothetical trial, but it is far from compelling. A requirement to perform a simple lift of a manageable beam weighing 8 to10 kg would not bespeak negligence on the part of the employer. On the other hand, a requirement to crouch or bend in a confined working space and to exert force while bearing the weight of a large beam involving some twisting of the body might attract liability. In my view, there is nothing to suggest that the materials that Mr Vukancic was required to handle were other than of a size and weight that could be manually handled with safety. The issue would have been whether the method of handling required of the worker was a safe one. In cross-examination, Mr Tozer accepted that builders often had to work at or near the ground, and that crouching was an everyday aspect of building work, regardless of headroom constraints. Mr Tozer really offered no more than his own opinion, as the literature to which he referred does not suggest that a requirement to lift such a weight as was here involved is unsafe. His opinion involves hypothesising that a weight which should ordinarily have been able to be lifted with safety was unsafe because of the posture, and the physical activity of hammering, required to accompany it. It is far from apparent to me that the physical activity of hammering in the requisite manner would involve significant forces on the lower back. The absence of evidence of opinion contrary to Mr Tozer's view is much less significant than would have been the case had Mr Tozer's ultimate and relevant opinion not been tendered pursuant to leave to reopen, after the defendant's case had been closed. 66 In my view, despite Mr Tozer's opinion, there was a very substantial risk, closely approaching 50%, that on his own version, Mr Vukancic would not establish liability against Dalma. When added to the general risks inherent in even the strongest cases, and to the modest risk for which I would allow in respect of acceptance of Mr Vukancic's version, I consider that the 50% discount proposed by Mr Downing is reasonable. Mr Vukancic's prospects of success in an employers' liability claim against Dalma did not exceed 50%. What damages would Mr Vukancic have recovered from Velcics if successful against them in a claim for breach of professional duty?

[76]

68 In those proceedings, Mr Vukancic's damages would have been the amount required to put him in the position in which he ought to have been but for Velcics' negligence (which I will assume for present purposes, though it will be necessary to return to it) in advising or allowing him to elect for permanent loss compensation under the Workers Compensation Act rather than for common law damages. Although at first this seemed to require no more than applying to his potential common law damages ($640,000) the prospects of that claim succeeding (50%) and deducting the workers compensation benefits received and to be received, closer consideration convinces me that such an approach does not accord with the complexity of the position. It would have been necessary for the court hearing the claim against Velcics to consider, first, whether, properly advised, Mr Vukancic would have elected to claim common law damages, and secondly, if so, whether and to what extent he would have been better or worse off than his actual position as it had transpired. For present purposes I will assume (again, it will be necessary to return to this issue) that, properly advised, Mr Vukancic would have elected to bring a common law claim. Whether and to what extent he would have been better or worse off as a result requires analysis of (1) his actual position in the events which have happened, against (2) his hypothetical position had he elected to claim damages, which involves (as I have accepted) a 50% chance that he would have succeeded, and conversely a 50% chance that he would have failed. 69 This does not mean that the full value of the workers compensation and top-up insurance benefits that Mr Vukancic has received must be deducted from the value of his common law claim after the hypothetical damages have discounted by 50% for risk of failure. I confess that I was initially of the view that the deduction ought to be from the discounted value of the common law claim, because what was involved was a comparison of the chance of success on the common law claim with the certainty of receipt of the workers compensation benefits. But on closer reflection I am convinced that this would be incorrect. Ultimately, the purpose of an award of damages is to put the plaintiff so nearly as money may do in the position in which he or she would have been but for the relevant act or omission. For present purposes, the relevant act or omission is that of Velcics, in permitting Mr Vukancic to elect against a claim for common law damages, and what Mr Vukancic lost as a result was the chance of obtaining benefits more valuable than his workers compensation rights. Valuing that loss requires comparing his hypothetical position had he not elected against damages (which involves the possibilities that a common law claim may or may not have succeeded) against his actual position, having elected against damages (that he has received and will continue to receive workers compensation). The value of the loss is informed by the extent to which he would have been better off if successful; the extent to which he would have been worse off if unsuccessful; and the probability of success, which determines what point on the scale between those two positions reflects the value of his chance. That is an exercise which requires a comparison of the actual and hypothetical positions before any discount is made for the risk that the hypothetical position would not have been achieved. 70 Moreover, while the commencement of proceedings for damages would have operated as an election against any claim for permanent loss compensation under Workers Compensation Act, ss 66 and 67 (by reason of Workers Compensation Act, s 151A(3)(a)), only the actual receipt of damages would have disentitled him from other workers compensation payments, including weekly payments (by reason of Workers Compensation Act, s 151B). Thus, had Mr Vukancic brought an unsuccessful common law claim, he would not have lost his right to weekly payments. Accordingly, it is fallacious to see the potential outcomes in terms of a dichotomy between a chance of a successful common law claim (and no workers compensation) on the one hand, against the certainty of full workers compensation benefits on the other.

[78]

72 To deduct 100% of his future workers compensation benefits as at the date of assessment from the value of his employers' liability claim discounted for the risk of failure would therefore be erroneous on at least two grounds: first, it would treat his loss of workers compensation benefits as a certainty, when (as with success at common law) there was only a corresponding 50% prospect of their loss; secondly, it would be wrong to suppose that he would receive no workers compensation payments in the event of an unsuccessful common law claim, when in fact in that event he would continue to be entitled to weekly payments. 73 The actual position: As things transpired, Mr Vukancic elected, by reason of Workers Compensation Act, s 151A(3)(b), to claim permanent loss compensation, thereby extinguishing any claim that he had for damages for employers' liability. As a result he recovered weekly payments (which he continues to receive), permanent loss compensation, and top-up insurance benefits. It is necessary to adopt a conventional date as at which the workers compensation benefits he has received and will in the future receive can be valued, in order to compare them with the potential benefits he would have received had he elected for common law damages. In Tipper v Williams (No 2) (NSWCA, 6 May 1994, unreported, BC9404994), the trial judge used for that purpose the date on which the common law damages would have been recovered had the claim not become statute-barred, and the Court of Appeal adopted the same approach. Accordingly, damages for future economic loss were assessed as at the hypothetical trial date of the employers' liability claim. In the Court of Appeal, the value of the benefits already received as at that date, and the value as at that date of (then) future workers compensation benefits, were deducted. Similarly, I adopt as the valuation date the notional date of trial of the employers' liability claim (1 March 2001), when the common law damages would have been received. 74 First, Mr Vukancic continued after 1 March 2001 to receive weekly payments, and continues to do so today. It is foreseeable that he will continue to receive such payments indefinitely. The quantum of those payments has increased by reason of the birth of two further children, which he always anticipated and intended to have.

[79]

75 Contrary to the submissions made on behalf of Mr Vukancic, I do not understand the Court of Appeal in Tipper v Williams to have enunciated any rule that, for the purpose of determining - as at the date of the hypothetical trial of the employers' liability claim - the value of future workers compensation benefits actually received, known facts which have occurred since the valuation date that have affected the quantum of workers compensation benefits must be disregarded. The purpose of the exercise is to ascertain to what extent the plaintiff's actual position (after the relevant act or omission) is inferior to his hypothetical position (absent the relevant act or omission). So far as ascertaining the actual position is concerned, in this context courts prefer knowledge to speculation [Malec v J C Hutton Pty Limited (1990) 169 CLR 638; Charles v Hugh James Jones & Jenkins [2000] 1 All ER 289]. The present exercise is not analogous to ascertaining an exchange value in a market, in which case the knowledge of the market at the date of valuation is determinative; rather, it involves ascertaining the value at the valuation date of a future income stream which is liable to vary from time to time, for the purpose of identifying so far as practicable the true value of the workers compensation rights that Mr Vukancic has retained. This involves determining the value, as at the valuation date, of what he has actually received between then and the hearing of the professional negligence claim (against Velcics), and what he will probably receive thenceforth. Accordingly, while the value of Mr Vukancic's workers compensation benefits is to be ascertained as at the hypothetical trial date of the employers' liability claim for purposes of comparison with common law entitlements, that does not mean that in ascertaining the value of those benefits, the Court hearing the professional negligence claim against Velcics should ignore events that had happened since. To the extent that subsequent events inform the true value of his compensation benefits, they may be taken into account whenever they happened. The Court hearing the hypothetical case against Velcics would have been entitled to have regard to circumstances up to the date of the trial before it in evaluating the benefits that Mr Vukancic had actually received. It follows that the increase in workers compensation benefits attributable to the birth of two additional dependant children must be taken into account.

[80]

76 I do not agree with the submission for Mr Vukancic that it is a corollary that his economic loss should be calculated by having regard to increases in wages after the notional trial date of the employers' liability claim, based on known increases in the wages of comparable employees subsequent to that date. There are at least two reasons for this. The first is that the applicable discount rate is struck to take into account the impact of inflation and interest. While it is necessarily imperfect in achieving that balance, it is a conventional way of taking into account prospective routine increases in wages. The second is that the exercise involves comparing what Mr Vukancic would have received but for the relevant act or omission, with what he has in fact received. What he would have received is the chance of an award of common law damages, assessed according to what was known and provable at the notional trial date of the employers' liability claim. That could not be influenced by changes in circumstances after that date (1 March 2001). What he has in fact received, however, can be informed by circumstances known up to the hearing of the professional negligence claim against Velcics (1 September 2005). 77 Mr Vukancic has a dependent wife and four children, three of whom are still dependent. In 3 years this will reduce to two dependent children, after 13 years this will reduce to one dependant child and after 15 years to none. Between March 2001 and September 2005 (4.5 years), Mr Vukancic received weekly payments totalling $103,965. The mid-point (2.25 years) was June 2004, and the value as at 1 March 2001 of a sum of $103,965 deferred for 2.25 years is $93,048. 78 As at 1 September 2005, Mr Vukancic was in receipt of $489.75 net per week, which he would have continued to receive until 29 October 2010 when Marko attains 18, a period of about 5.2 years; the lump sum required to produce $489.75 net per week for 5.2 years is $117,540, and its value at 1 March 2001 (deferred for 4.5 years to 1 September 2005) is $94,032. From October 2010 he would be entitled to the statutory rate for a worker with a dependant spouse and two dependant children which, as at September 2005, was $455 net per week (based on $563 gross per week) until February 2020 when Marin attains 18, a period of 9.25 years; the lump sum required to produce $455 net per week for 9.25 years is $176,540, and its value at 1 March 2001 (deferred for 9.7 years to October 2010) is $110,337. From February 2020 until Patrick attains 18 years of age in May 2022, a period of 2.25 years, he would be entitled to the statutory rate for a worker with a dependant spouse and one dependant child, which as at September 2005 was $400 net per week, (based on $485.10 gross per week); the lump sum required to produce $400 net per week for 2.25 years is $44,400, and its value at 1 March 2001 (deferred for 19 years to February 2020) is $17,582. After May 2022 until retirement at age 65 in August 2028, a period of 6.25 years, he would be entitled to the statutory rate for a worker with a dependant spouse which as at September 2005 was $364.50 net per week (based on $422.20 gross per week); the lump sum required to produce $364.50 net per week for 6.25 years is $102,060, and its value at 1 March 2001 (deferred for 21.25 years to May 2022) is $36,027. Thus the value (as at 1 March 2001) of Mr Vukancic's future (as at 1 September 2005) workers compensation rights, totalled $257,978. 79 It is necessary to discount the future workers compensation benefits for vicissitudes, including that they may be reduced or terminated in the future, and that they may be commuted for a lump sum. Although they are to be valued on a basis similar to future economic loss (as the present value of a future income stream) and not according to the value for which they might be commuted to a lump sum, the circumstance that if commuted only a sum significantly less than their discounted present value would likely be obtained is a relevant consideration. In Tipper v Williams, Clarke JA thought that in valuing future workers compensation rights there was no constant deduction and different rates would be appropriate for different cases and circumstances. In that case, his Honour applied an allowance of 30%, saying: Further, it has often been said that there is a real difference between the benefit of a lump sum to a person in the position of the respondent and the benefit of periodical payments (see, for instance, Scott & Ors v Echegaray [1991] Aust Tort Reports 69129 at 69137-8) and the fact that on a redemption a worker receives a much lesser sum than would be arrived at by the conventional discounting procedures followed in assessing common law damages is, to an extent, a recognition of this. In all these circumstances it seems to me that the appropriate course is, in the light of his Honour's findings and the manner in which he approached impairment of future earning capacity, to proceed upon the basis that the respondent was entitled to receive the appropriate weekly sum payable as at 31 May 1987 for 29 years and then to apply a discount for vicissitudes of the same percentage applied by Wood J. It will be recalled that Wood J took the view that while the respondent was partially incapacitated his chances of returning to the workforce were theoretical rather than real and his Honour applied a high discount of 30 per cent, partly, to take account of the possibility he might earn moneys from time to time. Likewise, I believe that a discount in the same percentage should be adopted to take account of the vicissitudes which apply in respect of the workers' compensation entitlements. Although the considerations may be different where there has been an award made by the Compensation Court, it seems to me appropriate to make a significant deduction for the vicissitudes in order adequately to give recognition to the uncertainties concerning the amount of workers' compensation payments which may be received in the future and the fact that if the respondent wished to obtain a lump sum it would be very much smaller than the amount arrived at by the valuation process I propose. In addition the prospect, which his Honour took into account in fixing an allowance for vicissitudes, that the respondent may find some work in the future should not be overlooked and if he did secure part-time, or even full-time, employment that could have a significant impact on the level of workers' compensation payments to which he could look forward. 80 In the present case, although no award for weekly payments has been made by the Compensation Court - those payments having been made voluntarily - there are awards in respect of permanent loss compensation, which establish eligibility for compensation. However, there have been some negotiations for a commutation, which demonstrate that if he accepted a commutation Mr Vukancic would receive a sum much less than the true value of his entitlement to periodical payments. There is also evidence, in the form of periodical medical certificates, that he has some capacity for light duties; on the other hand there is no indication that the workers compensation insurer has taken any step towards reviewing his entitlements to receive weekly payments indefinitely. In my view, his entitlement is not so precarious as was the case in Tipper v Williams, and I will allow a discount of 22.5% for vicissitudes in this respect. 81 Such a discount reduces the value as at 1 March 2001 of Mr Vukancic's future weekly compensation benefits from $257,978 to $199,932. As at the date of the hypothetical trial against Velcics he would have already received weekly payments up to 1 September 2005, no allowance for vicissitudes is warranted in respect of the sum of $93,048. Accordingly, as at 1 March 2001, Mr Vukancic retained entitlements to weekly compensation payments worth $292,980. 82 As well as weekly payments, Mr Vukancic received, for permanent loss compensation, $37,500 paid to him on 25 March 1998 pursuant to the settlement on 11 March 1998, and a further $30,000, pursuant to the settlement on 28 January 2003. In addition, he received the proceeds of a "Top Up" insurance benefit from Cover Force Insurance, of $37,467.15 on 7 December 1998, and a further $20,838.75 on 5 May 2003. Perfection would require allowing interest on the earlier payments until February 2001, and discounting the later payments for deferral after that date, but the amounts are distributed in a manner on each side of the valuation date that sufficient justice is attained by neither allowing interest on the earlier payments, nor discounting the later ones, before bringing them to account. 83 The "top up" insurance payments were pursuant to a policy which provided, inter alia, "workers compensation top up cover" for employees of the Policyowner, including in the case of permanent injury an amount equal to 100% of the Lump Sum Benefits under s 66 and s 67 of the Workers Compensation Act, subject to certain exceptions. Clause 20(a) of the Policy provided that no benefit was payable for workers compensation top up cover where the employee was not entitled to compensation under the Workers Compensation Act, except where a loss of entitlement was solely a consequence of an unsuccessful common law action in accordance with Workers Compensation Act, s 151A. Accordingly, had Mr Vukancic brought a successful common law claim, he would not have been entitled to the "top up" benefits he in fact received. But had he brought an unsuccessful common law claim, he would still have been entitled to those benefits, though not to lump sum compensation under ss 66 or 67.

[81]

84 For Mr Vukancic it was submitted that the factors referred to in National Insurance Company of New Zealand Limited v Espagne (1961) 105 CLR 569, 573, indicated that the proceeds of the top-up cover were not to be deducted from his damages. There are several answers to this submission. First, the present issue is simply not that which arose in Espagne. Here, the relevant loss is not that against which the employee was insured, and the question is not whether an insurance benefit should be deducted from damages recoverable in respect of the injuries for which the plaintiff was insured, but measuring the economic loss which the plaintiff has suffered by being deprived of a cause of action against his former employer. Necessarily that involves comparing his hypothetical financial position, absent the relevant act or omission, with his actual financial position consequent upon the act or omission, and credit must be given for the financial benefits he has received, but would not have received but for the relevant omission. Such benefits include the proceeds of the top-up cover, as much as the lump sum compensation and periodical payments. In valuing economic loss, these countervailing economic benefits must be brought to account. Secondly, clause 20(a) of the Policy makes transparently clear that Mr Vukancic could not have received a top-up benefit if he had recovered common law damages. Thirdly, even if Espagne were relevant, the relevant indicia show that it was never intended that an employee receive both common law damages and "top-up" insurance benefits: (1) the policy was taken out by the employer, and (2) it made specific provision, in clause 20(a), to the effect that benefits were not payable if the employee brought a successful common law claim. 85 Accordingly, in the events that have happened, Mr Vukancic having brought no claim for damages for employers' liability and having elected for permanent loss compensation, he retained entitlements to weekly compensation payments worth (as at 1 March 2001) $292,980, and to permanent loss compensation worth a total of $67,500. He also retained an entitlement to top-up insurance payments worth in total $58,305.90. The total value of those benefits is $418,786. 86 The hypothetical position: If Mr Vukancic had brought a claim for damages for employers' liability and failed, he would (as at 1 March 2001) have retained entitlements to future weekly compensation payments worth $292,980. He would also have retained an entitlement to top-up insurance payments worth in total $58,305.90. But he would have had no entitlement to permanent loss compensation. The total value of those rights is $351,286. He would therefore have been $67,500 worse off than had he elected for permanent loss compensation, and in addition he would have had a potential exposure to liability for solicitor-client and party-party legal costs. If, on the other hand, Mr Vukancic had succeeded, he would have received common law damages of net $640,000, and would have been better off by $221,214 than had he relied exclusively on his workers compensation rights. 87 The lost chance. It follows that the scale of possible outcomes, based on values as at 1 March 2001, was from negative $67,500 (plus costs) to positive $221,214, relative to Mr Vukancic's actual position. The conclusion that the prospects of success were 50% dictates that the value of the chance that Mr Vukancic lost is at the midpoint of that scale, which is positive $76,857, before allowing for any risk in respect of costs. There is no evidence to suggest that Mr Vukancic had any assets of significance, the risk as to costs may for practical purposes be regarded as not a significant factor. Interest would have been allowed on that sum from 1 March 2001 to judgment on 1 September 2005, which at the rates applicable for the purposes of prejudgment interest amounts to $32,395.75, and results in a total of $109,253. 88 In my view, therefore, if successful against Velcics, Mr Vukancic would have recovered damages in the order of $110,000 as at 1 September 2005. What were Mr Vukancic's prospects of success in his claim against Velcics? 89 It is not in issue that, having been retained by Mr Vukancic to advise and act for him in respect of remedies available to him as a result of his work injury, Velcics owed him a duty to exercise reasonable skill, care and diligence in and about the performance of the retainer, including in advising Mr Vukancic and commencing and maintaining proceedings on his behalf. The contentious issue is the solicitors' discharge of that duty, and causation. Again, it is not for me to resolve that issue definitively, but to evaluate Mr Vukancic's prospects of establishing liability, as a step in valuing the lost cause of action for damages for breach of professional duty against Velcics.

[82]

90 Although it was once the case that a solicitor consulted to advise on a workers compensation claim may not have been obliged to advise also on common law rights [Griffiths v Evans [1953] 2 All ER 1364, (Somervell and Romer LJJ; Denning LJ dissenting)], it is plain that in this State nowadays a solicitor must, in the context of an election between workers compensation and common law rights, advise the client of the impact of an election on common law rights [cf Scott v Echegaray]. In Chamberlain v Ormsby, Tobias JA expressed it this way: [111] The simple fact is that the appellant was entitled to have his common law entitlements properly investigated, appropriate medical evidence obtained and advice, if appropriate, as to how his case might be affected by his drug taking and other aspects in respect of which the solicitor expressed concern. All these matters would need to have been explained to him in a manner that enabled him to come to a rational and informed decision. He was deprived of that opportunity. 91 Accordingly the following view of Denning LJ, expressed in dissent in Griffiths v Evans (at 1369-70), now prevails: On those quite simple facts, the question is wheter the solicitor did his duty by the client. In particular, ought he to have considered whether the man had a claim at common law? I am clearly of opinion that he should have done so. When a workman goes to a solicitor and tells him he has had an accident and wants the solicitor to take on the case, the very first question the solicitor ought to put to himself is this. What is the man's legal position? Every solicitor ought to know that there is all the difference in the world between a case where the employer is to blame and a case where he is not. If the employer is not to blame, the man only gets workman's compensation. If the employer is to blame, either for negligence or for breach of statutory duty, the man gets the much higher award given by common law. I cannot think it is right for the solictor to escape by saying: "You only consulted me about workman's compensation, not about common law damages". That attributes to the workman a legal knowledge of the difference between them. Many workmen do not in fact know the difference, and it would be most unfair to attribute such knowledge to them. This workman certainly did not. All he knew was that he was receiving weekly payments from his employers or their insurance company and that he was receiving them as compensation for his accident. It was not for him to know the difference between compensation under the Acts and compensation at common law, but it was the business of the solicitor to know it, and to know also, in those days, that the workman had an option to claim one or other which, once exercised, could not be retracted. 92 According to Mr Vukancic, at no time did Mr Velcic ask him how he suffered his injury, let alone referred to the potential for damages at common law if fault could be established. 93 Although Mr Velcic professes no recollection at all of Mr Vukancic or any consultation with him, with recourse to notes of the consultations on 14 August 1996 and 29 January 1997, and his "usual practice", he maintains that he did seek particulars of the accident, and did provide advice as to common law rights. His note of 14 August 2006 records that Mr Vukancic told him that the accident occurred on 24 May, and that he had been lifting a piece of timber when he felt pain in his back; he was unable to say whether there was any witness. Mr Velcic's file note of 29 January 1997 records: "Client lifting piece of timber about 3-4 m when sharp pain in low back. Demo. Lift part of timber - nailed into place. Witnesses - not sure ?? … D.O.I - 27/5/96". 94 At least in respect of the first consultation, on 14 August 1996, Mr Vukancic's version is corroborated by his wife. However, I am unpersuaded that his recollection of these consultations is reliable. While I do not necessarily accept that Mr Velcic's reconstruction is entirely accurate, I see no reason to doubt that his file notes are accurate records, so far as they go, of the consultations. They record information about the incident, which could only have been provided by Mr Vukancic. In the light of those notes, the suggestion that Mr Velcic asked nothing about the accident is quite implausible. So is the suggestion that Mr Vukancic was never consulted about settlement negotiations that took place. 95 On the other hand, I am unpersuaded that Mr Velcic's reconstructions should be accepted where they go beyond the contents of his notes. The notes do not show on their face any reference to consideration of common law potential. Mr Velcic says that a reference to "liability" in the note of 29 January 1997 is such a reference, but in my view it could equally well refer to liability under the Workers Compensation Act. There is no note, which one would expect, of an explanation of the consequences of electing for workers compensation or for damages. There was at least a reasonable prospect of establishing that Mr Vukancic was given no adequate explanation of his common law rights and the consequences of election. 96 Moreover, according to Mr Velcic, at the 29 January 1997 consultation, he says he would have had the medical reports of Dr Jakovac and Dr New; by that date he had also received (and should have read) that of Dr Giblin of 30 October 1996, and possibly that of Royal Rehabilitation Hospital of 25 July 1996. He also had the claim form, and said that (according to his invariable practice) he would have read to Mr Vukancic the account of the accident contained in the claim form, either before or after having him demonstrate the incident. He says that he would have advised Mr Vukancic that day to the effect "Nothing you have told me so far would cause me to think you have rights at common law. You need to choose whether to proceed at common law or workers compensation, but there is nothing to suggest you have any common law rights. Is there anything else you can tell me about the accident that could cause me to think differently?", and that the absence of any notation of a response indicates that there was none of substance. 97 Mr King SC, assuming that a solicitor was given a history that included less than 1.2m of headroom, taking lengths of timber and affixing them horizontally to the face of a plywood structure, holding the lengths of timber horizontally with his left hand while nailing them with a hammer in his right hand, it being necessary to adopt a cramped and awkward position to do this with regular bending and twisting, that the solicitor ought to have advised that expert opinion be obtained from a consultant engineer, of the type that was ultimately obtained from Mr Tozer: the solicitor should have advised of the potential availability of a common law action, the implications of the election provisions, the limitation period, the need for expert evidence on liability, and the applicable thresholds, and sought out the names of witnesses.

[85]

100 In his evidence in chief, Mr Velcic himself said that had he been told Mr Vukancic was working in an area with reduced headspace, he would have recorded it and made inquiries in respect of common law rights, since the circumstances would suggest some common law potential. He said that had he been told that the injury occurred when Mr Vukancic was crouched in a confined space holding up a timber beam and nailing it, he would have seen obvious common law potential; when asked why, he identified (1) that he was working in an elevated position, and (2) that he was crouching and being asked to exert force while holding a large piece of timber, a "clearly inappropriate" system of work which offered clear common law potential and called for further investigation. 101 In my judgment, Mr Velcic was not justified in saying that there was nothing to suggest any common law potential, but ought to have recommended obtaining expert and/or counsel's opinion, or at the least further investigating the facts, while pointing out that the case was not a clear cut one. Such an investigation would have produced the facts that emerged at the trial before me. I do not accept that Mr Vukancic was not forthcoming with information about his accident: there was no difficulty in eliciting it if the appropriate questions were asked, and Mr Velcic's note of 29 January 2001 suggests that he obtained a version very similar to that which was ultimately given in Court. 102 What advice should Mr Velcic have given in those circumstances? Having regard to the conclusions reached above, the appropriate advice would have been that Mr Vukancic had fair - about 50/50 - prospects of succeeding in an employers' liability claim; that if he succeeded he would be better off than otherwise (perhaps by in the order of $200,000); that if he failed he would be worse off (perhaps by in the order of $75,000) and be exposed to liability for costs, because he would recover no permanent loss compensation, but that he would remain entitled to weekly payments; accordingly, that while there was probably more upside than downside to electing for common law damages, such a course was not without significant risk. I recognise that it would not be possible, at the relevant time, to be precise about the potential differences in position, but it should have been possible to recognise that, if successful, there would have been a substantial advantage, and, if unsuccessful, some but a significantly lesser disadvantage, than if he were to rely on his workers compensation rights.

[86]

103 In my view, in the context of those matters, reasonable opinions might well differ, between solicitors and potential plaintiffs, as to whether or not it was worthwhile or prudent to elect for common law damages, and Mr Velcic would not have erred in recommending that Mr Vukancic rely on his workers compensation rights; but if he were to do so it was necessary that he provide Mr Vukancic with an analysis and explanation that enabled him to form his own view as to whether or not the risk was worth taking [cf Chamberlain v Ormsby, [111]; Hamze v Bradstreet [2007] NSWDC 54, [92]-[93] (Rein DCJ)]. It was in advising Mr Vukancic that there was nothing to suggest that he had any common law rights that Mr Velcic fell short of his duty to his client. 104 If that view prevailed at the hypothetical trial, Mr Vukancic would have succeeded against Velcics. Of course, it is possible that that view might not have prevailed; as I have concluded that common law employers' liability was far from clear cut, a court might have accepted that it was reasonable for Mr Velcic to form the view that there was no common law potential - but the much more likely outcome was that it would have held that he ought to have concluded that there was at least an arguable case, and there was some prospect that the court would find that there was no advertence to common law potential at all. There are, however, further reasons to discount the prospects of success, and why Mr Vukancic would have been well advised to settle his claim for less than full value. His (and his wife's) versions of the consultations with Mr Velcic were demonstrably inconsistent with contemporaneous records, and there was a risk that Mr Velcic's version would be preferred. While the basis on which I think Velcics was likely to be found liable does not depend on acceptance of Mr Vukancic's evidence, the risk as to his credibility would nonetheless have made settlement at a slight discount prudent. 105 There was also the risk that, in the proceedings against Velcics, the Court would have found that, properly advised as to the costs and other risks of common law proceedings, Mr Vukancic may have decided in any event to rely only on his workers compensation rights. Evaluation of this issue is not assisted by the absence of any evidence addressing what Mr Vukancic would have done if given such advice, although it is accepted (and indeed obligatory in cases to which the (NSW) Civil Liabilities Act 2002 applies) that inferences of reliance may be drawn objectively from the circumstances without sworn assertions of what the plaintiff properly advised would have done. As Basten JA observed in Chamberlain v Ormsby: [137] In the present case, the trial judge appears to have been content to assume that, if a significant benefit were available, on the basis of a common law claim, the Appellant would have opted to proceed with such a claim. On one view, in the absence of evidence from the Appellant as to what he would have done, had he been given information of the kind before the Court in the present proceedings, it may be difficulty to be satisfied on the balance of probabilities of the relevant causal connection. On the other hand, the test of causation is ultimately one to be determined on all the relevant material and not merely upon the assertion of the plaintiff as to what he or she would have done in hypothetical circumstances. Indeed, an appropriate assertion may, of itself, carry little weight: see, eg, Rosenberg v Percival (2001) 205 CLR 434 at [15]-[17] (Gleeson CJ); [44]-[45] (McHugh J); [86]-[87] (Gummow J); [157]-[158] (Kirby J) and [221] (Callinan J), dealing with the course a patient would have taken if warned of the risks of a proposed operation. 106 As his Honour also pointed out, again in Chamberlain v Ormsby: [136] In Dunn v Firth [2003] NSWCA 280, Beazley JA noted at [11] the finding of the trial judge that had the appellant been advised "that the prospects of success were 50% or better the appellant would have made an election and sued at common law". Her Honour noted that findings with respect to causation were not challenged. However, as Davies AJA noted, concurring, had the appellant been advised "that the prospects of recovering substantial damages were so small and the costs and difficulties of a common law trial so great that common law proceedings ought not to be instituted", he thought she would have heeded the advice: at [72]. Commonsense suggests that this is correct and that, in order to know what a plaintiff would do, if given advice with respect to a common law claim, it is necessary to identify each of the relevant considerations, including the value of workers compensation payments which would be deducted or would cease; the chances of proving negligence and the likely damages if a claim were successful. 107 Mr Vukancic might have been risk averse, and he might have preferred the certainty of permanent loss compensation to the risk. But his determination in suing first Velcics and then Bells does not suggest that he is faint-hearted when it comes to litigation. And the logic of the figures is telling: although he may have had even prospects of winning and losing, the prospective benefit of a win exceeded, by about 200%, the prospective detriment of a loss. In my view, the probabilities favour the view that properly advised, he would have elected for common law damages, although I allow for a significant element of risk that the court hearing the hypothetical claim against Velcics might have concluded otherwise. 108 Mr Downing submitted that a total discount of 40% - assessing Mr Vukancic's prospects against Velcics at 60% - was appropriate. My conclusion that Velcics' liability would be established on his own version, even if Mr Vukancic's evidence were disbelieved, reduces the risk and increases the prospects. I conclude that Mr Vukancic's prospects of success in his lost claim for damages for professional negligence against Velcics were about 65%. While this is a matter of broad assessment and not mathematical calculation, it is unsatisfactory to give no explanation of how it is derived. As a broad indication, I have treated the reduction of the general and miscellaneous vicissitudes of litigation, exacerbated by the credit difficulties that Mr Vukancic would encounter, as a risk of 7.5%; the relatively slight possibility that the hypothetical trial court would have found Mr Velcic justified in concluding that the case against Dalma had no common law potential as a risk of 7.5%; and the much more substantial risk that it would have found that properly advised, he would have elected to rely on his workers compensation and not common law rights, as one of 25%. When these risks are compounded (92.5% x 92.5% x 75%) the result is overall prospects of success of 64.17%, which I round to 65%. Conclusion

[91]

112 Assuming reasonable skill, care and diligence on the part of Mr Bell, the proceedings against Velcics should have been commenced by mid 2002, and would have been heard by about 1 September 2005. 113 Valuing what Mr Vukancic lost by that claim becoming statute barred requires comparing his hypothetical position in the event he had not elected against damages (which involves the possibilities that a common law claim may or may not have succeeded), with his actual position that he did elect against damages and has received and will continue to receive workers compensation. The value of the lost chance of being better off is informed by the extent to which he would have been better off if successful; the extent to which he would have been worse off if unsuccessful; and the probability of success, which determines what point on the scale between those two positions reflects the value of his chance. 114 Had Mr Vukancic brought an unsuccessful common law claim, he would not have lost his right to weekly payments, and it is fallacious to see the potential outcomes in terms of a dichotomy between a chance of a successful common law claim (and no workers compensation) on the one hand, against the certainty of full workers compensation benefits on the other. The comparison of his actual and hypothetical positions is to be made before any discount of the hypothetical position for risk, and to deduct 100% of his future workers compensation benefits as at the date of assessment from the value of his employers' liability claim discounted for the risk of failure would be erroneous. 115 While the value of Mr Vukancic's workers compensation benefits is to be ascertained as at the hypothetical trial date (of the employers' liability claim), that does not mean that in ascertaining the value of those benefits, the Court hearing the hypothetical claim against Velcics ignores events that have happened since. To the extent that subsequent events inform the true value of his compensation benefits, they may be taken into account whenever they happened, because the purpose is to value what he has actually received, the employers' liability claim not having proceeded. But it is not a corollary that his economic loss should be calculated by having regard to increases in wages of comparable employees subsequent to the hypothetical trial date (of the employers' liability claim), because in that respect the purpose is to ascertain what he would have received had the case proceeded to trial on that date. 116 Mr Vukancic's actual position, as at the hypothetical trial date against Velcics on 1 September 2005, having brought no claim for damages for employers' liability and having elected for permanent loss compensation, was that he retained entitlements to weekly compensation payments worth (as at 1 March 2001) $292,980, to permanent loss compensation worth $67,500, and to top-up insurance payments worth $58,305.90, a total of $418,786. 117 Mr Vukancic's hypothetical position, as at the hypothetical trial date against Velcics on 1 September 2005, had he brought a claim for damages for employers' liability and failed, was that he would have retained entitlements to future weekly compensation payments worth (as at 1 March 2001) $292,980, and to top-up insurance payments worth in total $58,305.90. But he would have had no entitlement to permanent loss compensation. The total value of those entitlements is $351,286. He would have been $67,500 worse off than had he elected for permanent loss compensation, and he would also have had an exposure to liability for solicitor-client and party-party legal costs. On the other hand, had he brought such a claim and succeeded, he would have received common law damages of net $640,000, and would have been better off by $221,214 than had he relied exclusively on his workers compensation rights. 118 The scale of possible outcomes, based on values as at 1 March 2001, was from negative $67,500 (plus costs) to positive $221,214, relative to his actual position. The conclusion that the prospects of success were 50% dictates that the value of the chance that Mr Vukancic lost is at the midpoint of that scale, which is positive $76,857, before allowing for any risk in respect of costs. As there is no evidence to suggest that Mr Vukancic had any assets of significance, the risk as to costs for practical purposes may be regarded as not a significant factor. Interest would have been allowed on that sum from 1 March 2001 to judgment on 1 September 2005, amounting to $32,395.75, and producing a total of $109,253. 119 Accordingly, if successful against Velcics, Mr Vukancic would have recovered damages in the order of $110,000 as at 1 September 2005. 120 Having regard to the general and miscellaneous vicissitudes of litigation, exacerbated by the credit difficulties that Mr Vukancic would encounter; the relatively slight possibility that the hypothetical trial court would have found Mr Velcic justified in concluding that the case against Dalma had no common law potential; and the substantial risk that it would have found that, properly advised, Mr Vukancic would have elected to rely on his workers compensation and not common law rights; Mr Vukancic's overall prospects of success in his lost claim for damages for professional negligence against Velcics were about 65%.

At a glance

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Judgment (95 paragraphs)

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Cases Cited (7)

Cited By (1)